Stopping the Race to the Bottom on Taxes

The U.S. is energizing a global effort to put a floor under corporate tax rates

- Peter Coy

When I interviewed Kimberly Clausing in 2017, she was an economics professor at Reed College in Portland, Ore., with intriguing but seemingly unachievable ideas for how to make multinational corporations pay taxes. I wrote that her plan was worth studying “if only to see how much better things could be if politics didn’t get in the way.”

Well, look at her now. In January, just five days after starting a new job at UCLA School of Law, she was offered the position of deputy assistant Treasury secretary for tax analysis. She took a leave from UCLA a month later to make the move to Washington. Her boss, Treasury Secretary Janet Yellen, and her boss’s boss, President Joe Biden, have embraced international cooperation in fighting tax avoidance. And the long-shot agenda that Clausing and a circle of academics and activists campaigned for is suddenly looking doable. “There is a strong international consensus around addressing these problems, and our action can encourage action abroad,” she said in February in testimony to the Senate Finance Committee.

After decades of undermining one another, 139 rich and poor nations are closing in on a framework for taxing multinational corporations that would be the biggest change in the system since 1923. The goal is to create a united front to prevent corporations from playing one country off against another, recognizing that a race to the bottom in taxation has no winner, only a bunch of revenue-deprived losers.